Optimal Portfolios of National Currencies, Commodities and Fuel, Agricultural Commodities and Cryptocurrencies during the Russian-Ukrainian Conflict

Abstract

This study sets out to explore the impacts of the Russian-Ukrainian conflict on worldwide financial markets by considering a large array of national currencies, precious metals and fuel, agricultural commodities and cryptocurrencies. Estimations span the period since the Russian invasion until the takeover of the Ukrainian city of Mariupol. Optimal portfolios are constructed for separate categories of financial assets for different levels of risk-aversion by investors. The Chinese yuan, gold, corn, soybeans, sugar and Bitcoin prove to be safe haven investments while the Japanese yen, natural gas, wheat and the combination of Bitcoin and Ethereum offer profit opportunities for risk-seekers. Notably, the agricultural commodities’ portfolio is the best performing while the cryptocurrency portfolio generates the worst risk-return trade-off. National currencies could act as safe havens in the place of gold when all types of assets can be combined. Natural gas is revealed to be the most reliable profit generator. Overall, high risk appetite does not result in large improvement in portfolios’ returns. This study sheds light on investors’ optimal decision-making during elevated geopolitical uncertainties and provides a compass for improving welfare.

The Bitcoin‐agricultural commodities nexus: Fresh insight from COVID‐19 and 2022 Russia–Ukraine war

“…They argue that BTC shows more vital connectedness to other markets over time, and it is heterogeneous in the direction of information spillovers from different segments of agricultural commodity markets. Kyriazis (2022) found evidence that a portfolio of agricultural commodities would perform best after the outbreak of the Russia-Ukraine war in 2022, while a portfolio containing cryptocurrencies would not be worth considering for its risk-reward.…”

Understanding Investor Sentiment: Analyzing Its Influence on Stock and Cryptocurrency Markets During the Russia–Ukraine War

“…Yang (2023) also found that the war negatively impacts the crypto market, evidenced by reduced trading volumes for Bitcoin. Bitcoin and Ethereum have offered profit opportunities for risk‐seeking investors, while the overall cryptocurrency portfolio has experienced a poor risk–return trade‐off (Kyriazis 2022). The cryptocurrency SOL was found to be less affected compared to BNB and XRP (Ma 2022).…”

Research on the Impact of U.S. Interest Rate Soaring

“…In addition, Kyriazis noteed that the outbreak of the Russian-Ukrainian military conflict on February 24 had a considerable impact on the global financial markets. This event led to a rise in risk aversion in the financial markets, which resulted in a gradual rise in the price of US bonds [13].…”